RealtyTrac: Flipped Homes in 5 Chicago ZIP Codes Average 100+% ROI

by James F. McClister


Though we’ve moved past the golden years of flipping that followed the housing market’s collapse in 2007, as the market returns to a stable posture – consistent price increases included – the practice of flipping is regaining some of its former popularity, according to RealtyTrac’s newly released Q3 2015 U.S. Home Flipping Report. From July to September, over 43,000 condos and single-family homes were flipped, or 5 percent of total transactions during the quarter.

Quarter-over-quarter, RealtyTrac reported a 7 percent drop, but examined on a year-over-year basis, the share of total transactions that were flips grew an impressive 18 percent. It is worth noting that in Q3 2014, the share of homes flipped was at its lowest level (4.3 percent) since the first quarter of 2000 – when RealtyTrac first started tracking flipped homes.

As was expected, considering the drop in flipping share, the average gross flipping profit, which is the difference between purchase price and flipped price, was down from last quarter, falling slightly from $62,521 to $62,1222, but again, examining data from the same period last year, RealtyTrac recorded a rise of more than $300.

When considering the price of rehab costs and other expenses occurred prior to flipping the property, otherwise known as the average gross return on investment (ROI), the group found a year-over-year rise of more than a percentage point to 33.8 percent.

While returns nationwide were impressive, and are convincing even more investors and traditional homeowners to enter the flipping market, returns were much more positive in the Chicagoland area, where five Cook County ZIP codes made it in the top 20 for average gross ROI, averaging 112.86 percent – more than triple the national average.

In three of the ZIP codes featured – 60652, 60402, 60634 – the share of flipped properties was in the double digits. The remaining ZIP codes still had shares above the national average.

First-time Buyers Buy Flips

According to RealtyTrac Vice President Daren Blomquist, the dip in flipping in 2014 was largely a result of slumping prices and shallow inventories, but the market’s makeup has changed and now investors are interested.

“After curtailing flipping activity last year due to slowing home price appreciation and shrinking inventory of flip-worthy homes, real estate investors have started to jump back on the flipping bandwagon in 2015,” he said.

Blomquist added that, on the acquisitions side, investors are creating new ways to more accurately pinpoint potential flips in the “off-market arena.” Another boost investors are getting is from an influx of FHA buyers, many of whom are first-time homebuyers, who are eager to find an affordable starter home.

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